Prince Estate’s $31 Million Distribution Deal Is Rescinded

Prince performing in Los Angeles in 2009. The deal includes his later albums and unreleased recordings, as well as disputed rights to classic earlier albums.

Kristian Dowling / Getty Images

By BEN SISARIO

July 13, 2017

Five months ago, the estate of Prince announced a major deal with the Universal Music Group for distribution rights for a substantial portion of the music star’s vast catalog. The largest of a series of multimillion-dollar contracts lined up in the months after Prince died, it was estimated at $31 million.

But in a turn of events that has stunned the industry, the deal has now been rescinded by a judge, after Universal accused representatives of the estate of fraud and misrepresentation during negotiations and threatened a lawsuit if the company was not allowed to withdraw from the deal and get its money back.

On Thursday, Judge Kevin W. Eide of Carver County District Court in Chaska, Minn., issued an order approving a request to rescind the deal that was filed by Comerica Bank & Trust, the bank that took over as administrator of the estate the day after the deal was signed.

Prince died on April 21, 2016, at age 57, from an accidental overdose of an opioid painkiller. He left no will, which has led to drawn-out and contested proceedings among his six heirs, some of whom did not want the Universal deal voided.

“Universal Music Group and the estate of Prince Rogers Nelson welcome the court’s approval of our amicable resolution to this matter,” the company said in a statement. “We look forward to continuing to work closely together on Prince’s music publishing and merchandise to ensure that we deliver the very best experiences to Prince’s fans around the world.”

Once the deal is formally canceled, the estate will have to refund Universal’s money, which was paid in full as a distribution advance. Then the estate will need to find a new buyer for the material, which includes Prince’s later albums and much of his storied vault of unreleased recordings, as well as a set of disputed rights that were at the heart of the case.

But industry lawyers have said that any future deal may be clouded by this dispute, in which Universal argued that it had been duped into paying for rights that were already held by a rival company, Warner Bros. Records.

For Universal, the value of the deal hinged on when the company would gain rights to release many of Prince’s classic earlier albums — like “1999,” issued in 1982 — in the United States after existing deals with Warner Bros. expired.

When Universal announced the agreement in February, it said it would start to gain those rights next year. But Warner Bros. disputed that account, saying a contract it signed with Prince in 2014 guaranteed those rights for longer.

Universal then demanded that the deal be canceled and accused L. Londell McMillan, a longtime music executive who helped negotiate the deal as an expert adviser to the estate, of deceiving the company over the true rights, which because of a confidentiality clause Universal saw only after it had completed the deal.

The judge did not address the accusations of fraud against Mr. McMillan but said instead his decision had been made to avoid further litigation. The estate, he said, should proceed cautiously to preserve its assets.

In a statement, Mr. McMillan, a lawyer who once represented Prince, said he respected the court’s decision and added: “There was no wrongdoing on our end. We stand by our work.”

The judge also noted that he was making no determination about the interpretation of Prince’s contracts, since under the terms of Universal’s and Warner Bros.’ deals, those decisions would have to be made by courts in California and New York. For the estate, that may cause complications in its efforts to find a new buyer or may lower the value of the catalog.

The order also left undecided whether Mr. McMillan and another adviser to the estate, Charles Koppelman, would have to return their commissions on the deal, which were set at a total of 10 percent, according to court filings.